If I roll over my private company stock into a Roth IRA, can I make 15 percent of it liquid via a withdrawal?

I am over 59.5 years old. I am having my private company stock retirement rolled over into an IRA to avoid the 20 percent tax. This will be a direct rollover. It seems like a Roth IRA would be the best option here. Once the money arrives in the IRA, I would like to make about 15 percent of it liquid via a withdrawal. Am I allowed to do that since I am over 59.5 years old?

Retirement, IRAs, Stocks, Taxes
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4 days ago

So glad you asked this question. You have a very complex situation that will require more assistance than I can provide here. Please consult with a fee-only financial advisor to help with decision making.

In short, company stock in a 401(k), which I believe you have implied because you mention rolling it over to an IRA, may qualify for special tax treatment. Qualification will need to be determined because you say "private" company stock. Is it a publicly traded stock? That special tax treatment can save you thousands of dollars in taxes if implemented correctly. You also reference "avoid the 20 percent tax." I think you are referring to the 20% withholding if you withdraw retirement funds, but that is only a minimum withholding, the real tax bill, most likely much more, will ultimately get calculated at year-end tax filing. 

Also, a direct rollover to an IRA, as you mention would be from a pre-tax account to pre-tax account, which is fine. But then going to a Roth IRA, which is after-tax, would trigger tax on everything upon conversion. This is not recommended. This is the tax you were trying to avoid when you thought it was only 20%. To answer your last question, yes, once funds arrive in an IRA, you may make a withdrawal, but full taxes will be due on the amount withdrawn. The only advantage to being 59.5 is that you do not pay a penalty for an early withdrawal.

Back to the special treatment for the company stock, here are two articles that explain what you are facing in the way of complexities and decisions to be made. Best that you do it with professional assistance. https://www.investopedia.com/investing/rolling-over-company-stock/   https://www.kitces.com/blog/net-unrealized-appreciation-irs-rules-nua-from-401k-and-esop-plans/  

4 days ago
6 days ago